Here’s how your tax bill could change after the election

ANALYSIS: The run-up to an election is always an intriguing time, with parties and politicians vying for airtime and taking turns to gain the upper hand.

While taxes may seem like less of an issue this time around (think capital gains tax and the proposed Tax Task Force from the last election), Covid-19 and its disruptive effects mean that tax, the main source of Government revenue is actually a major driver in helping the New Zealand economy to recover and prosper.

It can also be a lever to pull (or not pull) to incentivize spending to stimulate the economy, redistribute wealth, and drive investment in the right areas.

With this in mind, we have summarized some of the key tax policies of the major political parties.

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Will my personal income be taxed the same?

Given that Covid-19 directly affects many New Zealanders’ purchasing power, employment levels, and economic confidence, it is not surprising that many parties are suggesting changes to personal tax rates and thresholds.

At one end of the spectrum are Labor and Greens, and Labor is proposing a new personal income tax rate of 39 percent for any income earned above $ 180,000. The Greens have proposed introducing two new income brackets, 37% for income earned between $ 100,000 and $ 150,000 and 42% on income earned above $ 150,000.

Parties at the other end of the spectrum focus on what are effectively tax cuts, and ACT suggests flatter tax rates by cutting the tax rate from 30 percent (on income earned between $ 48,000 and $ 70,000) to 17.5 percent. hundred. National has suggested adjusting the tax bracket thresholds up (temporarily through March 31, 2022) so that people with average incomes pay less in taxes.

The New Conservatives also suggest raising the tax thresholds (with a tax-free income threshold of $ 20,000), and both the New Conservatives and National propose indexing the brackets (to inflation and cost of living respectively).

What changes are proposed for companies?

Some of the parties have suggested tax changes for businesses, primarily to incentivize spending and investment, or to reduce compliance costs.

None of the party’s policies are particularly radical (at least not as radical as a capital gains tax), but there are some potential savings or accelerated deductions available to companies as a result of some of the proposals.

National proposes temporarily raising the threshold for an immediate deduction for capital assets from $ 5,000 to a whopping $ 150,000 per capital asset, with a doubled depreciation rate for property, equipment, and machinery above this amount to incentivize investment in these assets.

Additionally, National also proposes that any asset that experiences a drop in depreciated value below $ 3,000 can be expensed. The number of depreciation rates would be consolidated and reduced, and would also be revised to incentivize investments in energy efficiency and safety equipment.

Some changes are proposed to reduce the compliance costs imposed on businesses through the tax system, particularly in relation to small businesses. Labor proposes to reform AIM to make it easier for SMEs to move to a pay-for-income model throughout the year, while National proposes to raise the provisional tax threshold from $ 5,000 to $ 25,000 and raise the GST registration threshold from $ 60,000 at $ 75,000 in turnover per year.

National also proposes to change the UOMI rates to reflect appropriate credit rates and increase the interest rate paid on amounts owed by the IRD to its clients.

NZ First proposes to accelerate depreciation (at rates similar to Australia) and also proposes tax concessions for certain start-ups in rural and regional New Zealand.

The Opportunity Party proposes a flat tax rate of 33% on all income from all sources (versus the current business tax rate of 28% or the Maori Authority tax rate of 17.5%). The party also proposes repealing the provisional tax regime for SMEs.

Changes in property taxation

While a capital gains tax may not get the usual amount of airtime in this election, a 2 percent tax on unrealized capital gains on residential property (other than whānau / family home ) is a policy of the Maori Party.

The Opportunity Party proposes a minimum annual property tax under which the equity value (total value minus debt) of real estate investments would be taxable, calculated annually using a 3 percent risk-free rate of return approach. hundred. This tax would be paid at a 33 percent rate, with several options available if there were no cash to pay the tax.

National’s Housing Policy includes proposals to repeal recently enacted rules to delineate residential property losses and reduce the residential property clear line test from five to two years.

Some other noteworthy proposals include:

The award for the most radical approach is likely to go to The Opportunities Party, which proposes a tax-free universal basic income for each New Zealander of $ 250 per week.

The new conservatives suggest exploring a “tax on all transactions” (as a possible replacement for GST), under which all transactions would be subject to a small amount of tax. The party also proposes to remove the tax effect on taxes that GST has, such as removing GST from government-imposed tariffs, fees and excise duties.

Neither party suggests using the tax system to incentivize positive environmental behavior, aside from National and The Opportunities Party, which suggest eliminating FBT from electric vehicles (in National’s case only until 2025) to encourage companies to migrate. to electric vehicles in their fleets.

Both Labor and Greens refer to working with the OECD to find a viable global solution to tax digital services, but propose to implement a digital services tax to tax highly digitized companies if a global solution cannot be found.

The Greens propose introducing a new net worth tax of 1 percent on a person’s wealth above $ 1 million and 2 percent on a person’s net worth above $ 2 million.

ACT proposes to temporarily cut the GST rate from 15% to 10% (until June 2021).

Saying that, out of the myriad policies that have been announced, it is most likely that Labor or National tax policies will ultimately shape post-election tax changes. In general, most political parties have put forward tax proposals that could affect New Zealanders, using different levers to achieve different results that fit with their party’s policies.

Robyn Walker is a tax partner and Brendan Ng is managing director of Deloitte NZ.